Com. of Mass. v. Lyng, s. 89-1302

• Decision Date: 03 October 1989
• Docket Number: Nos. 89-1302,89-1303,s. 89-1302
• Citation: 893 F.2d 424
• Parties: COMMONWEALTH OF MASSACHUSETTS, Plaintiff, Appellant, v. Richard E. LYNG, et al., Defendants, Appellees. COMMONWEALTH OF MASSACHUSETTS, Plaintiff, Appellee, v. Richard E. LYNG, et al., Defendants, Appellees, Coalition For Basic Human Needs, Plaintiff, Intervenor, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 424

893 F.2d 424

COMMONWEALTH OF MASSACHUSETTS, Plaintiff, Appellant, v. Richard E. LYNG, et al., Defendants, Appellees.

COMMONWEALTH OF MASSACHUSETTS, Plaintiff, Appellee, v. Richard E. LYNG, et al., Defendants, Appellees, Coalition For Basic Human Needs, Plaintiff, Intervenor, Appellant.

Nos. 89-1302, 89-1303.

United States Court of Appeals, First Circuit.

Heard Oct. 3, 1989.

Decided Jan. 9, 1990.

As Amended Jan. 16, 1990.

Douglas H. Wilkins, Asst. Atty. Gen., with whom James M. Shannon, Atty. Gen. was on brief, for plaintiff, appellant Com. of Mass.

Steven Savner, Massachusetts Law Reform Institute, with whom Patti A. Prunhuber, Western Massachusetts Legal Services, was on brief, for plaintiff, intervenor, appellant Coalition for Basic Human Needs.

Drake Cutini, Atty., U.S. Dept. of Justice, Civ. Div., with whom Stuart E. Schiffer, Acting Asst. Atty. Gen., Wayne A. Budd, U.S. Atty. and Robert S. Greenspan, Atty., Dept. of Justice, Civ. Div., were on brief, for defendants, appellees.

Before BOWNES and TORRUELLA, Circuit Judges, and TIMBERS, Senior Circuit Judge. ^*

BOWNES, Circuit Judge.

These appeals, from a summary judgment denying declaratory relief sought by the Commonwealth of Massachusetts, involve the treatment, for the purpose of calculating federal food stamp benefits, of a specially appropriated clothing allowance paid by the Commonwealth to recipients of Aid to Families with Dependent Children ("AFDC") or on General Relief ("GR").

The basic matter before us is the district court's decision upholding the agency's interpretation of the pertinent statute that the clothing allowance payments must be included as income of the recipients in determining food stamp benefits.

Appellants are the Commonwealth, on behalf of its Department of Public Welfare, and the Coalition for Basic Human Needs, an organization of welfare recipients committed to improving their economic and social situation. Appellees are Richard E. Lyng in his capacity as Secretary of Agriculture; S. Anna Kondratas, Acting Administrator of the Food and Nutrition Service; and Linda Silva, Regional Director, Family Nutrition Program, Northeast Region.

FEDERAL STATUTORY AND REGULATORY BACKGROUND

The Food Stamp Program is designed to raise nutrition levels among low-income households by providing needy people with coupons with which to buy food through normal channels of trade. 7 U.S.C. Sec. 2011. Determination of eligibility and calculation of specific benefits depends on household size, income, resources (assets), and compliance with work registration requirements. Participation in the program is limited to those households whose income and other financial resources "are determined to be a substantial limiting factor in permitting them to obtain a more nutritious diet." 7 U.S.C. Sec. 2014(a).

The Food Stamp Program is administered at the federal level by the U.S. Department of Agriculture's Food and Nutrition Service ^S. Each state choosing to participate in the program designates an agency which carries out the state's responsibilities under the Act, including certifying applicant households and issuing monthly benefits to them. 7 U.S.C. Secs. 2012(n), 2020(a). The federal government pays for the full cost of food stamp benefits, its own administrative costs, and at least 50% of eligible state administrative expenses. 7 U.S.C. Sec. 2025(a).

The Food Stamp Act of 1977, Pub.L. 95-113, 91 Stat. 962, directed the Secretary of Agriculture to develop a quality control system aimed at reducing errors on the part of state agencies in administering the program. The Act was subsequently amended by Pub.L. 97-253, Sec. 180, 96 Stat. 782 (1982), to establish specific error rate liability targets. At the time this suit was initiated, the error rate target was five percent. 7 U.S.C. Sec. 2025(d)(2)(A) (1982), replaced by Pub.L. 100-435, Sec. 604(2), 102 Stat. 1675 (1988). If a state's error rate exceeded this percentage, the federally-funded share of its administrative costs was reduced. Id. A state could appeal payment error rate liability claims filed against it, and seek judicial review of the final determination by the Secretary. 7 U.S.C. Sec. 2023(a), amended by Pub.L. 100-435, Sec. 603, 102 Stat. 1674 (1988). The Secretary could not initiate collection against states for payment errors until after the completion of these procedures. 7 U.S.C. Sec. 2025(d)(6) (1982), as amended by Pub.L. 99-198, Sec. 1537(a)(2) (1985), replaced by Pub.L. 100-435, Sec. 604(2), 102 Stat. 1675 (1988).

The Food Stamp Act defines income for the purpose of calculating benefits as "all income from whatever source." It then specifically excludes eight categories of items from the broad net cast. 7 U.S.C. Sec. 2014(d). One of these categories is:

(8) moneys received in the form of nonrecurring lump-sum payments, including, but not limited to, income tax 7 U.S.C. Sec. 2014(d)(8).

refunds, rebates, or credits, cash donations based on need that are received from one or more private nonprofit charitable organizations, but not in excess of $300 in the aggregate in a quarter, retroactive lump-sum social security payments or railroad retirement pension payments and retroactive lump-sum insurance settlements: Provided, That such payments shall be counted as resources, unless specifically excluded by other laws. (Emphasis added).

The regulatory provision implementing the statute reads:

(c) Income Exclusions. Only the following items shall be excluded from household income ... (8) Money received in the form of a nonrecurring lump-sum payment, including, but not limited to, income tax refunds, rebates or credits; retroactive lump-sum social security, SSI, public assistance, railroad retirement benefits, or other payments; lump-sum insurance settlements; or refunds of security deposits on rental property or utilities. These payments shall be counted as resources in the month received, in accordance with Sec. 273.8(c) unless specifically excluded from consideration as a resource by other Federal laws.

7 C.F.R. Sec. 273.9(c)(8). ¹ Massachusetts claims that FNS' determination that the clothing allowance is not a nonrecurring lump-sum payment and must be counted as income contravenes these provisions and therefore is incorrect as a matter of law.

THE MASSACHUSETTS CLOTHING ALLOWANCE

In federal fiscal year 1981, the Massachusetts Legislature authorized funds in its annual budget for a one-time clothing allowance for AFDC recipients, on the condition that the grants would not be counted as income under the food stamp program. Mass.St.1981, c. 351, 4403-2000. Each year since FY 1981 the Legislature has similarly appropriated available funds. Since FY 1983 the Legislature has also allotted clothing money for GR recipients. The grants, most recently in the amount of $150 per AFDC child and $115 per GR child or adult, have been paid in a lump-sum in September in order to enable recipients to buy clothes at the beginning of the children's school year and prior to the onset of cold weather.

From FY 1981 to 1984, FNS approved Massachusetts' exclusion of the allowance from the calculation of a household's income for the purpose of determining food stamp benefit levels, relying on the nonrecurring lump-sum payment exclusion. In 1984 FNS excluded the payments, but advised that "in the future it [would] be difficult for us to continue considering these payments as nonrecurring because they are becoming an annual issue." The Commonwealth appropriated and distributed clothing allowances again in 1985 and 1986. FNS advised that the 1985 payments would be counted as income but took no action against the Commonwealth. The next year FNS cited Massachusetts for alleged payment errors based, in part, on Massachusetts' exclusion of the allowances from its income calculations for food stamp eligibility.

PROCEEDINGS BELOW

The Commonwealth appealed its payment error rate for 1986 through the two administrative avenues available to it, arbitration and a good cause waiver request. The arbitration avenue has been exhausted. FNS has not ruled on plaintiff's good cause waiver request for 1986. ² In May 1987, after requesting arbitration but before filing its good cause waiver request, the Commonwealth filed this action for declaratory judgment. Similar administrative appeals had been initiated by Massachusetts relative The district court permitted the Coalition and an individual food stamps recipient to intervene. Defendants then moved to dismiss on the grounds that the plaintiffs' claims were not ripe for judicial review and that plaintiffs had not exhausted their administrative remedies. The court denied defendants' motion to dismiss in a published opinion. Commonwealth of Mass. v. Lyng, 681 F.Supp. 91 (D.Mass.1988). The parties then filed cross motions for summary judgment. On January 17, 1989, the court granted summary judgment for the defendants. It held that because of the deference due the agency's interpretation of the statute, its ruling that the Massachusetts clothing allowance must be included as income for food stamp recipients should stand. The Commonwealth and the Coalition appeal. They contend that the district court erred as a matter of law in deferring to the Secretary because the intent of Congress was clear as to the applicability of the exclusion and the agency's interpretation is not reasonable.

to its FY 1987 error rate prior to the time the district court heard this case.

JURISDICTION

Appellees ( FNS or Secretary ) claim that the district district court should not have exercised its jurisdiction because appellants (Massachusetts or Commonwealth) have failed to exhaust their administrative remedies. We agree with the district court's determination of the exhaustion issue as explained in its denial of FNS' motion to dismiss which was based on the same grounds. The district court found that "[o]n balance, the need of the Department and intervenors to resolve this...